Download Bank Performance: A Theoretical and Empirical Framework for by Jacob Bikker, Jaap W.B. Bos PDF

By Jacob Bikker, Jaap W.B. Bos

Economic literature will pay loads of consciousness to the functionality of banks, expressed when it comes to pageant, focus, potency, productiveness and profitability. This e-book presents an all-embracing framework for a number of the latest theories during this sector and illustrates those theories with functional purposes.

Evaluating a vast box of analysis, the publication describes a revenue maximizing financial institution and demonstrates how a number of widely-used types should be geared up into this framework. The authors additionally current an summary of the present significant tendencies in banking and relate them to the assumptions of every version, thereby laying off mild at the relevance, timeliness and shelf lifetime of a few of the versions. the implications contain a collection of concepts for a destiny study time table.

Offering a accomplished research of financial institution functionality, this booklet comes in handy for all of these project learn, or have an interest, in components equivalent to banking, pageant, supervision, financial coverage and monetary balance.

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Additional info for Bank Performance: A Theoretical and Empirical Framework for the Analysis of Profitability, Competition and Efficiency

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In this section and the next we further refine the type of efficiency that best serves this purpose as well as means to measure this efficiency. We start with a short introduction into bank behavior. Next, we briefly explain the importance of the concept of duality. Then we turn to bank production and examine how it is best captured. What remains are the formulation of a cost minimization model and a profit maximization model respectively. 22 It increases output up to the point where marginal costs equal marginal revenue and average costs are minimized.

The regulatory regimes evolve over time. g. on information technology, data collections and risk management theory, are stimuli to develop new risk management techniques and new regulatory regimes. In fact, it is the responsibility of banks to have adequate capital; regulation only prescribes minimum requirements. Under the increasing complexity of financial products and financial markets, the development of new regulatory rules depend more than before on cooperation between the most advanced financial institutions and regulators.

Banks maximize their profits by equating marginal cost and perceived marginal revenue. The perceived marginal revenue coincides with the demand price in competitive equilibrium and with the industry’s marginal revenue in the collusive extreme (Shaffer, 1993). Based on time series of industry data, the conjectural variation parameter, λ, has been determined by simultaneous estimation of the market demand and supply curves (see Chapter 10). For the average bank in a perfectly competitive market, the restriction λ = 0 holds, as, in a competitive equilibrium, price equals marginal cost.

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